Main focus of Friday, August 3, 2012

Draghi disappoints crisis countries

Europe's stock markets took a downwards turn after Draghi's statements. (© AP/dapd)

The ECB will buy the bonds of crisis-stricken state only if they apply for assistance from the euro bailout bond and fulfil the conditions that entails, ECB chief Mario Draghi explained on Thursday. With this statement he is breaking his promise to save the euro and ruining the credibility of the ECB, some commentators admonish. Others say it is only right that countries are expected to bear more responsibility for their own fate in the crisis.

Declarations of love for euro not enough

It was dishonest of Draghi not to make good on what he had pledged last week, in the eyes of the liberal business paper Diário Económico: "He began by saying that he would do whatever it took to save the euro, but then he did nothing. ... How normal this has become at the EU institutions: first they study the problem then wait and see what happens. ... The markets don't like encoded messages or people who say one thing and then do another. But this is precisely the way the EU politicians do things: declarations of love for the euro but nothing to back them up. ... The credibility of the EU institutions has been destroyed. This ECB decision was clearly influenced by pressure from Germany and once again Germany's orthodox financial approach has won the day. ... As far as Germany is concerned it would be a sacrilege for the ECB to buy bonds. Draghi wanted to take this path, but has pulled back. Now the bank will only intervene after crisis countries ask the fund for help." (03/08/2012)

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Drahi makes a major blunder

With his catastrophic communication policy Draghi has gambled away the ECB's credibility, the liberal daily De Tijd criticises: "What got into Draghi? Does he really think that he can get away with telling investors - those of London City, mind you - that 'whatever it takes' will be done to save the euro one week, only to go back on his words the next? Someone has to tell this Italian that investors are a very excitable bunch. By making promises in London that he couldn't keep, Draghi has destroyed the credibility of the ECB. And that's a bad thing. ... The yields on Spanish bonds rose to 7.17 percent yesterday as a result of Draghi's blunder. Draghi will no doubt find this highly irrational once more. But faced with such wretched communication skills it's entirely rational that the investors are running scared." (03/08/2012)

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Euro bailout is the task of politics

ECB chief Draghi does well to make countries take their fate into their own hands, writes the liberal-conservative daily Corriere della Sera: "With their downhill run the markets are punishing Draghi for not keeping his promise. But the markets are wrong. ... An unlimited ECB aid programme for Italy and Spain of the kind Paul Krugman and many other experts around the globe are calling for would be in contradiction of the EU treaties. ... Unconditional ECB support would also torpedo the debt ceiling that the countries in question have agreed to under the pressure of rising borrowing costs. Because political Europe stubbornly refuses to act jointly in the crisis, the power of decision Draghi lays claim to has advantages that may be rewarded by less jittery financial markets. Firstly, he is leaving all the doors open to the ECB and secondly, he is reminding the political leaders of a key truth: saving the euro depends not just on the ECB but also on the governments and their voters." (03/08/2012)

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ECB forcing Spain to seek bailout

The ECB has indicated that it is willing to buy massive amounts of government bonds of crisis countries - but only once they have officially applied for help. This decision will have major repercussions for Spanish society, the left-liberal daily El País fears: "For Spain, the consequences are clear. Now that the door of direct intervention by the ECB has closed, the government will have to think about applying for help from the bailout fund and when the best time to do so would be. … After the banking rescue the government insisted that the Spanish economy wouldn't need a second bailout. But now the conditions for refinancing Spain's debt make it seem inevitable that the government will have to apply for help from the ECB, breaking yet another of its emphatic promises. ... It's difficult to avoid the perception that the single currency will be maintained at the expense of draconian measures in Spain and Italy, with unforeseeable consequences for society." (03/08/2012)

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Weidmann undermines Draghi's plan

It was a wise move by ECB chief Mario Draghi to present a roadmap for the purchase of European government bonds, writes the liberal business paper Financial Times Deutschland, hoping that Germany won't thwart his strategy: "Just harmony then? That would have been nice, so as not to compromise the psychological impact of Draghi's announcement. But it met with resistance from Germany, yet again from the head of the Bundesbank, Jens Weidmann, who it seems was the only one in the ECB Governing Council to vote against Draghi's plan. But not only Draghi's nose is out of joint. It is indeed unwise to break the ranks of the Governing Council in this situation. Weidmann is fanning mistrust where he should be fostering confidence, the central bank's main goal in the summer break. ... Now it depends on how Weidmann acts in the weeks to come. If he torpedoes the plan, he will erode the credibility of the entire initiative. And hopes for even a halfway calm late summer on the markets will be dashed." (03/08/2012)

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